Every business is in the business of making money. No business owner ever says, I don’t need to make any more money. These 10 tips are guaranteed to help you make more money and run your business more smoothly and effectively.
- See what the crowd is doing and do the opposite.
Over 50 percent of small businesses fail in the first year and about 95 percent are out of business by year 5. The primary reason most small businesses fail is inexperience and lack of business knowledge. Most business owners start with the best intentions, but they should also back up those intentions with a strong grasp of business basics. Our article The Race to Success in the August issue of our magazine, discusses in greater depth the importance of basic business knowledge to a small business’s success.
The fact is most businesses focus on getting by day to day and don’t plan for the long haul. This means between 80 and 95 percent of businesses are failing to take the proper steps to make their businesses successful. Don’t follow these failing practices. Carve your own path.
- Focus your time on the work that increases profits, sales, and cash flow.
The first thing you should do is complete an analysis of your time and make sure everything you are doing for the business leads to profits. Sit down and make a list of the tasks you are doing and the amount of time it takes you to complete them. You must determine if these tasks are worth your time. A simple formula is to divide your profit goal by 2,000 hours (this is roughly the number of work hours you do per year). The number you come up with is how much money you should be making per hour.
To maximize your time, you should outsource tasks that are taking too much time, especially is they are not your strong suits. For example, if you are having computer problems, hire a computer technician to help you. If accounting is not one of your strengths, hire a bookkeeper.
Don’t be afraid to delegate responsibilities. Train your staff and assign more duties to them. Hold weekly accountability meetings and keep track of everything your staff is doing to ensure work is being completed correctly and on schedule. SmartSheet is a free program that allows you to organize your workload. (We review SmartSheet in the August issue of Innovative Small Business.)
- Enhance your customer approach.
As a small business owner, your goal is to make money. First, decide who your ideal customer is and what they need to buy. You must educate your customers and let them know you are there to help them find the product that’s right for them. Educated customers buy more, and your job is to make the sale.
If you are turned down after your first attempt, keep trying. About 80 percent of people will buy a product after they have been contacted five times about it, but about 90 percent of businesses have stopped trying to make a sale by this point.
You must look at the customer’s specific needs and deliver the product that best meets those needs. Improve your business to deliver or solve their problems with a quality product every time. Being good isn’t good enough anymore.
The majority of businesses don’t look for new ways to sell products after the first sale. Do a follow-up with customers after the sale for quality control. Contact your customers and find out what you can do better next time. This will ensure you get clients for life, and they in turn will refer new ones to you.
- Increase sales to current customers.
The most valuable asset your business has is your current customers. They are also easier to sell to. Look at who your best customers are and figure out a way to sell them additional products. There is always an add-on or upgrade you can offer your customers. You can always create new products based on customer needs as well. Find out what your customers are asking for, and if you can’t deliver the product, find them someone who can. Remember, satisfied customers will refer you to their friends and family.
- Create a marketing system to stay in touch with customers.
Find a way to market your products by giving your customers small gifts that tie in to your business. For example, an accountant will send out calculators when reminding clients about tax season. Send out emails and letters in an effort to reach potential customers. Schedule follow-ups and meet with potential customers. If they decline, be polite but persistent, and let them know you are the perfect solution to their needs.
- Accelerate each step of the sales cycle.
Review Step 3 and determine if you can systemize the process. If you can offer your best customers a special discount for purchasing within a certain time period or buying in bulk, do so. This will make the customer pay promptly and you will receive more money upfront.
- Understand and utilize the most important rule of business.
Remember these facts:
- 20 percent of customers account for 80 percent of your sales.
- 20 percent of your products represent 80 percent of your sales.
- 20 percent of your employees do 80 percent of the work.
- 20 percent of your salesmen make 80 percent of your company’s sales.
- 20 percent of your time results in 80 percent of your profits.
Improving your accounting system so you can identify the “critical” 80 percent is vital to increasing your profits.
- Use these five critical accounting numbers to analyze your business performance.
The most successful businesses are run by the numbers. Every business owner must review the following five reports weekly:
- Cash: How much money do you have in the bank?
- Receivables: How much money do your customers owe you?
- Payables: How much money do you owe your vendors?
- Sales by customer and by item: Look at how much customers are spending, how often they are buying, and what products they are buying.
- Profit/Loss: What are your profits? How much money are you losing?
- Never totally trust your bookkeeper.
If you Google the words “bookkeeper fraud” you will find countless links about how bookkeepers embezzled thousands of dollars from their unsuspecting clients. As much as you believe something like that would never happen to you, experience proves otherwise!
Never allow your bookkeeper to have complete control over your checkbook or credit cards! Check and verify everything entered in your accounting system. Have the mail delivered to you and open it yourself. Question anything that seems suspicious. Reconcile all bank and credit card statements yourself monthly, or outsource it to your CPA. It’s always better to be safe than sorry.
- Be a lifetime learner.
Most business owners are technicians who got bit by the entrepreneurial bug. They usually are not natural entrepreneurs. They may have created a business for many reasons, but it’s usually because they believed they could do a better job than their bosses at meeting customer needs.
To be successful, you must always look for ways to improve your business. Never stop learning and researching. Read one business book each month, such as The Ultimate Sales Machine, The Guerilla Marketer, and The E-Myth Revisited. Subscribe to our magazine (Never above a shameless plug!). Never settle and always strive to push your business to the next level.
These 10 steps will help you increase your profits, sales, and cash flow no matter if you’re a startup company or a well-established company. In fact, this list should be reviewed annually to see how you can improve your business and increase your profits.